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AT&T closes $2.5B deal for Mexican operator Iusacell

AT&T (NYSE: T) officially closed its $2.5 billion purchase of No. 3 Mexican carrier Iusacell from Grupo Salinas. AT&T named company veteran F. Thaddeus Arroyo as CEO of Iusacell following the close of the deal.

As part of the deal, AT&T acquired all of Iusacell's wireless properties, including spectrum licenses, network assets, retail stores and around 9.2 million subscribers. Iusacell's wireless network currently covers around 70 percent of Mexico's approximately 120 million citizens. Iusacell will continue to be headquartered in Mexico City. AT&T has identified a team, to be based in Mexico City, to oversee the Iusacell integration effort.

Following the close, AT&T plans to create what it has billed as the first-ever North American "Mobile Service area" covering more than 400 million consumers and businesses in Mexico and the United States. "It won't matter which country you're in or which country you're calling--it will all be one network, one customer experience," AT&T CEO Randall Stephenson said in a statement.

Arroyo, a 19-year AT&T veteran, previously served as president of AT&T Technology Development, focusing on enhancing innovation for AT&T's business, customers and partners. Former Iusacell CEO Adrian Steckel will assist Arroyo with the integration of Iusacell into AT&T.

Iusacell has not yet launched LTE service, but AT&T said it intends to bring the "same network strengths" it has in the U.S., including an LTE network covering 300 million POPs, to Mexico. AT&T said its investments in Mexico, where smartphone penetration is about half that of the United States, "will help it address increasing demand for high-speed mobile Internet services in Mexico. AT&T sees a significant opportunity to increase smartphone adoption and mobile Internet usage in Mexico."

Since announcing the deal in November AT&T has repeatedly touted that Mexico has a rapidly growing middle class, and the second-largest economy and one of the highest per capita GDPs in Latin America.

Stephenson said in November he was "very enthusiastic" about the Mexican market and the government's rules for opening up the telecommunications sector. For example, the country's new rules require market leader América Móvil to offload assets as part of an effort to get its market share in Mexico below 50 percent from around 70 percent. Stephenson said that the rules "make it very, very attractive for companies to come in and invest" in expanding network coverage and capacity.

Meanwhile, Stephenson has been coy about whether AT&T would invest in additional wireless carriers in Mexico and the Latin American market, as some analysts have speculated. He said "Iusacell is a terrific platform" with a strong spectrum portfolio, though its network will need to be built out, he said in November. He noted that Nextel International has some "Mexican assets we would find attractive," but added that because the company is going through bankruptcy proceedings it's difficult to know what assets might emerge to be purchased.

Separately, on Friday AT&T also disclosed in a regulatory filing with the Securities and Exchange Commission that it intends to book $10 billion in losses in the fourth quarter. Part of that is a noncash, pre-tax loss of around $7.9 billion because of changes in its pension and post-employment plans partly due to "updated mortality assumptions," meaning its former employees are living longer.

AT&T is also booking a $2.1 billion noncash charge because it is abandoning certain copper network assets after it determined that "specific copper assets will not be necessary to support future network activity, due to declining customer demand for our legacy voice and data products and the migration of our networks to next generation technology." AT&T is planning to move is entire network to an IP infrastructure by 2020.

For more:
- see these two separate AT&T releases
- see this AT&T filing
- see this CNETarticle